Zale Q4 Net Earnings Fall, to Close 30 BBB Stores

Fine jewelry retailer Zale Corp. reported this morning a drop in quarterly earnings. Net earnings for the fourth quarter are $4.1 million or $0.08 per diluted share, compared with net earnings of $6.9 million last year, or $0.13 per diluted share.

The company says that as part of its strategy to improve brand performance and profitability at Bailey Banks & Biddle (BBB), it will be closing after the upcoming Holiday season 30 to 35 stores that “do not fit with its long-term positioning in the luxury goods market”.

Full year results did not sparkle much either. Total revenues increased 3.4 percent to $2.383 billion, compared to $2.304 billion for the prior fiscal year. On a comparable store basis, sales increased a paltry 0.3 percent for the year.

“During the year we made progress in the execution of our business plan, although the year proved challenging with the repositioning of the Zales brand,” said President and CEO Mary L. Forte.

“The increases to sales and earnings in fiscal 2005 did not meet our expectations, particularly due to the underperformance of the Zales brand and its impact on our consolidated results,” she added.

Closing the BBB stores will allow Zale to focus capital, inventory and resources on the more productive stores. Zale estimates the closures will cost it $13 million in 2006.

At the same time, Zale plans to open 65 stores and 40 kiosks during the coming year.

The jeweler currently forecasts revenue growth of 5-7 percent for the 2006 full year. These revenue expectations do not reflect the impact of the Bailey Banks & Biddle store closures.